Banking Company Strategy

Banking overview

A bank takes deposits from the public and lends that money back out to them. Real banks do a great deal besides — transfers, insurance, currency exchange, brokerage, financial planning — but Capitalism Lab simplifies all of that down to the traditional deposit-and-loan model. Lending is your only way of making money.

Do not let that simplicity fool you. Banking in Capitalism Lab is tricky to manage. This guide covers how to make a bank very profitable while keeping the risk of a major loss as low as possible.

In this guide

Concepts and terminology
Banking difficulty settings
Recommended difficulty settings
Picking headquarters and branch locations
Starting strategy — banking from turn one
Adding a bank to an established company
Bank troubleshooting
Conclusion

Concepts and terminology

Banks in Capitalism Lab borrow their vocabulary from the real finance industry. Here is what each term means in game.

Term	What it means in game
Banking headquarters	The firm that houses your bank and controls all its branches. Every profit and loss consolidates here, and with the City Economic Simulation DLC the corporate tax on those profits goes to the city the HQ sits in.
Bank branch	The customer-facing firms that take deposits and make loans. More branch coverage means more of both.
Branch deposits	Deposits from the general public at a branch. The amount depends on local customer traffic and the Savings Rate Modifier, and is also affected by brand, service quality and the depositor interest rate.
Corporate deposit	Called Deposits from HQ in game: deposits from in-game corporations or persons, including your own personal money. No branches are needed to take them.
Corporate loans	Called Loans from HQ: loans made to in-game corporations. No branches needed, and the interest depends on the borrower’s credit rating.
Capital ratio	Your equity capital against the loans issued. Equity capital is what the bank owns that is not customer deposits.
Loans-to-assets ratio	How much of the bank’s assets are lent out. At 90% of $100 million in assets you hold $10 million cash and $90 million in loans. The Maximum Loans-to-Assets Ratio is the level at which the bank stops lending.
Loan demand	Total appetite for borrowing. When it is exhausted no new loans are made — either because a branch has served every customer in its area, or because the whole economy has reached its limit (with Realistic Loan Demand on).

A worked example of the capital ratio. Inject $500 million into the bank and let depositors add $10.5 billion, and your equity capital is $500 million — even though the bank now holds $11 billion in cash. Lend $10 billion of it and your capital ratio is 5%.

Credit ratings

Every potential borrower carries a rating for the risk that they will not pay you back, from lowest risk to highest:

Banking difficulty settings

These settings change the profit and the risk of a bank enormously. Here is what each one does.

Competitors

The Competitors page of the banking difficulty settings

Setting	What it does
Aggressiveness of AI banks and insurance companies	How hard your AI rivals fight for market share. An aggressive banking AI spends more on advertising, staff training and branches, and raises deposit interest to pull customers away.
Number of AI companies focused on banking	How many competitors start the game as banks.
Tendency of AI to set up banks	How many diversify into banking later, after succeeding elsewhere. This does not change the number of banks at the start.

Bank

The Bank page of the banking difficulty settings

Setting	What it does
Feature: Bank	Whether banks exist at all. Switched off, nobody can create one and every loan comes from a single in-game bank — how Capitalism Lab behaved before this DLC.
Realistic Loan Demand	Caps total loan demand at the size of the economy. Switched off there are still limits, but far higher ones. It exists to bound how profitable banks can become. It has no effect on corporate loans — corporations can borrow up to the bank’s available cash or their own credit limit.
Base loan interest rate	The “normal” rate in the economy, affecting bonds, deposits and loans alike. The actual in-game rate still moves with the central bank’s decisions. Setting it very high does not automatically make your bank more profitable — you owe depositors more as well.
Maximum loan-to-assets ratio	The ceiling on how much of a bank’s assets may be lent out. You or an AI can voluntarily set a lower figure to cut risk, but never a higher one.
Required bank capital ratio	How much of the bank’s own assets must be held in reserve. Customer deposits belong to someone else and do not count as equity. Fall below this and no new loans can be issued.
Savings rate modifier	How much the public deposits in your branches. A high setting usually makes the game easier — a bigger deposit base to lend from — though a flood of deposits can make the capital ratio hard to hold. No effect on corporate deposits.
Initial net interest rate spread	The “normal” gap between what you pay depositors and what you charge borrowers. Pay 2% and lend at 5% and the spread is 3%. A wider spread is a more profitable bank. Your own spread still varies with the deposit rate you set and the loans you make.
Corporate deposit cap	The most one corporate depositor may hold relative to the others, so that no single corporation endangers the bank by withdrawing suddenly. It does not limit corporate deposits in total.
Economy’s impact on loan defaults	How many loans fail in a downturn. Set high, a bank must run a much more conservative portfolio — especially in a volatile economy.

Other settings that reach banking indirectly

Setting	Why it matters to a bank
Your starting capital, and competitors’	Set yours to High or Very High. Any lower and starting with a bank is a bad idea until you have accumulated capital elsewhere. The same holds for competitors — below high, they will not build banks at all.
Inflation and inflation strength	Inflation erodes your lending gains. Pay 3% and lend at 6% and you gain 3% nominally — but only 1% in real terms if inflation is 2%. Turning inflation down or off removes the drag.
Boom-bust cycle volatility	A more volatile economy means far heavier defaults at each downturn. High volatility together with a Very High economy impact on defaults can produce a catastrophic wave of them.
Number of competitors	More companies means more competition — but also a larger economy, and so more loan demand.

Recommended difficulty settings

These are for custom games. The official Banking and Finance DLC scenarios use their own.

Very Easy / Beginner

For getting a feel for running a bank without competition or heavy defaults complicating the picture. Strongly recommended if banking is new to you.

Number of AI companies focused on banking = None
Tendency of AI to set up banks = None
Realistic Loan Demand = No
Base loan interest rate = Moderate
Maximum loan-to-assets ratio = 90%
Required bank capital ratio = 1%
Savings rate modifier = 100%
Initial net interest rate spread = 4%
Economy’s impact on loan defaults = Very Low
Your startup capital = Very High
Inflation and inflation strength = Normal
Boom-bust cycle volatility = Low

Easy

Once the basics are second nature. You now face competition, and real losses if you lend badly.

Aggressiveness of AI banks and insurance companies = Low
Number of AI companies focused on banking = Moderate
Tendency of AI to set up banks = Moderate
Realistic Loan Demand = Yes
Base loan interest rate = Moderate
Maximum loan-to-assets ratio = 90%
Required bank capital ratio = 5%
Savings rate modifier = 100%
Initial net interest rate spread = 4%
Economy’s impact on loan defaults = Low
Your startup capital = Very High
Inflation and inflation strength = Normal
Boom-bust cycle volatility = Moderate
Number of competitors = 25

Medium

Close to the default settings, with a few adjustments.

Aggressiveness of AI banks and insurance companies = Moderate
Number of AI companies focused on banking = Moderate
Tendency of AI to set up banks = Moderate
Realistic Loan Demand = Yes
Base loan interest rate = Moderate
Maximum loan-to-assets ratio = 90%
Required bank capital ratio = 5%
Savings rate modifier = 100%
Initial net interest rate spread = 3%
Economy’s impact on loan defaults = Moderate
Your startup capital = Very High
Inflation and inflation strength = Normal
Boom-bust cycle volatility = Moderate
Number of competitors = 25

Hard

If you want a fight.

Aggressiveness of AI banks and insurance companies = Very High
Number of AI companies focused on banking = Very High
Tendency of AI to set up banks = Very High
Realistic Loan Demand = Yes
Base loan interest rate = Moderate
Maximum loan-to-assets ratio = 90%
Required bank capital ratio = 10%
Savings rate modifier = 100%
Initial net interest rate spread = 2%
Economy’s impact on loan defaults = Very High
Your startup capital = Very High
Inflation and inflation strength = Normal
Boom-bust cycle volatility = High
Number of competitors = 50

Picking headquarters and branch locations

Headquarters

Look for a city with low land cost and a low wage rate, and put the building on the outskirts where land is cheapest.

The location of the HQ is irrelevant to how the bank functions, so there is nothing to gain from expensive land in the center.

Once built it can only be demolished when every branch is gone and the bank holds enough money to repay all depositors.

Branches

Judge these exactly as you would a retail shop: a high-traffic location is what matters.

Starting strategy — banking from turn one

This is for starting the game as a banking company and living off it, at least for the first several years. It assumes the Medium settings above.

Build the HQ and two or three branches

Put the headquarters on the outskirts of a low-wage city and add no more than 2 or 3 branches. Keeping costs down now is what lets the bank accumulate equity.

The early bank is fragile. The danger is the capital ratio falling below the required level before equity has built up, which is exactly why overheads must start small.

Where to read the bank's current capital ratio

Set a small training budget

Branding and the deposit rate can wait; the training budget should be modest from the start.

Setting a small staff training budget for the branches

Transfer all your money into the bank

Every dollar you move in is equity capital.

Transferring corporate funds into the bank to raise its equity capital

Confirmation of the fund transfer into the bank

Cap corporate deposits

Limit what corporate depositors can put in, so that money does not flood the bank all at once and push the capital ratio below its minimum.

Setting a cap on corporate deposits

Unpause, and let the first month run

Loans start being issued and the bank starts making a profit.

The bank issuing its first loans and turning a profit after one month

Spend a little more — carefully

With an eye on the capital ratio, raise the training budget and start advertising.

Cut expenses immediately if profit dips too low or the capital ratio gets close to its threshold.

Bank expenses being adjusted as profit and capital ratio are monitored

Marketing has to be done through branches, because brand is calculated per city — unless you run the Digital Age DLC, where an internet company can advertise across every city at once.

Setting up marketing through a bank branch

Size up the competition

At this point your market share is very small. Growing it is the next job.

The competition page showing the bank's small market share

Raise or remove the corporate deposit cap

Only once the capital ratio is healthy.

Raising the corporate deposit cap once the capital ratio is healthy

Pull cash back out to fund more branches

Transferring cash out of the bank to fund new branches

If your transferable cash is very low, stop. That means the capital ratio is too close to its minimum — fix that before expanding.

Build in other cities and set the training budget centrally

Once every branch is built, set the training budget for all of them at once from the HQ.

Setting the training budget for all branches at once from headquarters

Have one branch per city handle that city’s marketing.

Assigning one branch per city to run the marketing there

Consider raising the deposit rate

A higher rate attracts more deposits — but it also raises the cost of every existing deposit, so expect profitability to dip in the short to medium term.

Raising the deposit interest rate to attract more deposits

If profits dip significantly, cut expenses. The aim is to expand, but cautiously. If something goes wrong, see Bank troubleshooting below.

Cutting expenses after a dip in profit

Decide what to do with steady profits

You can plough them back into a larger loan portfolio, or withdraw cash and fund other industries.

The bank now producing steady profits

Why diversifying matters

Funding other industries lowers the risk of the bank running short of cash or capital, because profits from elsewhere smooth out the temporary drops that loan defaults cause. Two industries worth expanding into:

Media
Retail and industry

The aggressive endgame

Once the other industries are earning well, you can afford far more risk in the bank: set the C loans (highest risk) to 100% and the loan-to-assets ratio to 90%.

Allocating 100% of new loans to the highest-risk C rating

The reason this works:

C loans make the most money — but when a recession arrives their default rate goes so high that a bank running only C loans normally runs out of money and goes bust.
With other industries behind you, you can transfer funds in when the bank runs low, or borrow and repay from those profits. You lose money in the short term; once the wave of defaults passes, the C loans prove very profitable indeed.

Adding a bank to an established company

Building a bank once you are already profitable means entering an industry where competitors are dug in. Two questions to answer first:

Is there a better use for the money? A bank running high-risk C loans returns roughly 6% to 8%. Growing your existing empire may beat that.
Is your income stable and large enough? Aim for at least $200 million annual profit and $500 million in cash, with no outstanding debts — so you can borrow in an emergency.

If you go ahead, you can skip the cautious early steps entirely, because you have the capital to put the ratio in a strong position immediately:

Transfer as much capital in as you can — preferably $500 million or more.
Set 100% of loans to C, the highest risk.
Set the maximum loan-to-assets ratio to 90%.
Put no cap on corporate deposits.
Build as many branches as you can in every city. It may cost hundreds of millions, and it is how you take market share quickly.
Set every branch’s training to maximum.
Advertise in every city, or through a single internet company, at maximum spend.
Leave the deposit rate level with your competitors’.

The bank then lends out both the capital you injected and a rapidly growing deposit base, and should become very profitable within months — taking market share steadily until its loan portfolio dwarfs its rivals’.

Bank troubleshooting

Capital ratio too low

The warning message that the bank's capital ratio is too low

The cause: the bank has lent too much relative to its equity. Usually one of:

Too many deposits arrived and were lent out before equity capital had built up.
The bank is unprofitable against the size of its lending — often heavy defaults, or a large overhead.
Too much money has been transferred out.

To get out of it: move money in from outside. Use profits from your other industries, or issue bonds or borrow from another bank and repay later.

You can also borrow from your own bank and use that money to improve its capital ratio.

To prevent it:

Limit deposits by stopping corporate deposits. If public deposits are the problem instead, cut training and advertising or lower the deposit rate so customers withdraw — carefully, because you can run out of cash doing this.
Keep expenses low: branches, advertising, training and deposit interest all count.
Raise income by lending more at high risk — with the defaults that may follow in mind.

Bank is out of cash

The warning message that the bank has run out of cash

The cause: no cash on hand to meet expenses. Transfer money in to solve it.

Cash on hand is not equity. A deposit raises cash on hand; lending it out lowers cash on hand — and neither changes the bank’s total equity.

Usually one of:

Deposits were withdrawn — often after you cut the deposit rate below competitors’, which sends depositors elsewhere.
You are lending too much against your assets, which happens when the maximum loan-to-assets ratio is at or near 100%.
A sudden wave of defaults, typical in a downturn.
Spending outrunning income.